SARS TO CRACK DOWN ON TAX AVOIDANCE SCHEMES
1. Since his appointment as Commissioner for the South African Revenue Service (“SARS”) eighteen months ago, Mr Edward Kieswetter has made a profound impression overall as a man of integrity and the will to pull SARS back to the brink of respectability. His pleasant disposition and self confidence coupled with his high intelligence make him extremely suitable to be Commissioner just now when South Africa has a dire need for leaders in all walks of life.
2. One is therefore inclined to pay immediate attention when Mr Kieswetter makes public statements on his areas of responsibility, namely SARS and tax in general.
3. Speaking on a webinar on Tuesday, 3 November 2020, Mr Kieswetter made a bold statement that SARS was looking to collect “tens of billions” in taxes from people and institutions who were deliberately hiding it from SARS. Kieswetter said that SARS had come across numerous schemes to avoid paying tax and was now diligently working to not only unwind these schemes, but also to collect what was due to the fiscus.
4. Finding more tax revenue has become a matter of urgency for South Africa because our country had been in a difficult economic position even prior to the Covid—19 lockdown in March this year. Since then the situation has become even worse, to the point where the projected tax revenues had fallen by R300 billion.
5. SARS’efforts to close this gap has already borne some fruit with its collecting about R500 million in tax from people who were not paying the tax due on the renting of second or third properties.
6. Aside from rental revenues , SARS has also prevented R500 million from being paid out by clamping down on export schemes where shell companies claim value-added tax (VAT)rebates, but do not trade as businesses and just shut down after a few months.
7. Kieswetter also highlighted concerns about companies that buy businesses that have incurred losses. The acquiring companies then use these losses by setting them off against income in order not to pay tax. He said that assessments “were never created to become a tradeable asset and we see a lot of activity around the buying and selling of entities for no other purpose but to require a tax loss”. By clamping down on these schemes , “there are comfortably tens of billions that can be collected”.
8. He points out that when measured year-to-year , we observe a contraction of almost 12% in employment taxes. There was also a contraction in company taxes of 23% over the first six months of this year. All of this means that “we are seeing an impairment of the tax base which will take a few years to recover”.
9. About the time when SARS became a victim of state capture, Kieswetter said : ”The hollowing out of SARS was no accident. It was a deliberate attempt under a leadership who had a corrupt agenda to do so specifically to serve their narrow interests. There was significantly reduced governance structure and institutional integrity”.
10. However, all is not doom and gloom. He pointed out that the tax authority is “well on its way in turning itself around”. This is very good news especially from the Commissioner’s mouth himself.
SOURCE: MONEYWEB